Q I’ve managed to secure a job as a teacher in Brunei, starting in August, which is very exciting.
I’m currently going through the process of getting my house ready to rent out which I will be doing through an agent given the distance and time difference. However, I’m a bit puzzled by the tax side of things and was hoping you could help.
I’ve been told by one agent that I will be liable to pay tax as a non-resident landlord, whereas other agents have said this is not the case. I’ve looked online (including through the government’s own advice) and I still don’t feel I’m sure.
Please could you advise me on the state of things around tax and any other advice you think I should have before renting for the first time?
JS
A I hope you’re going to use the first agent you spoke to as s/he is clearly more on the ball than those who told you that you wouldn’t be liable to pay tax as a non-resident landlord. They have clearly missed the part of their training telling them about the non-resident landlord scheme (NRLS). Under UK law, this obliges UK lettings agents to withhold basic-rate tax due on rental income before it is paid to a UK landlord who lives overseas. You are considered a non-resident landlord – and so come under the NRLS – if you live outside the UK for more than six months. If there is no letting agent, the tenant has to withhold the tax, and pay it to HM Revenue and Customs if the rent is more than £100 a week.
If you don’t want the letting agent to deduct tax from the rent, you have to send in form NRL1 either online or by post. This is worth doing provided your tax affairs are up to date and you do not expect to be liable for UK tax on your UK-based income. Whether you have your rental income paid before or after tax, you’ll need to fill in a self-assessment tax return as you would if you were a landlord living in the UK.
However the rent is paid, it makes sense to have it paid in sterling into a bank account in the UK to avoid currency conversion costs.
You also need to make sure that your mortgage lender is happy for you to let your house and check whether your insurers need to make changes to your buildings and contents policies once you have a tenant.
